Online International Interdisciplinary Research Journal, {Bi-Monthly}, ISSN 2249-9598, Volume-09, Mar 2019 Special Issue (02)

Layman’s Attitude towards Mutual Fund Investments, A Study with Special

Reference to Kerala

Arun Mathew
FDP Substitute Department of Economics Baselius College Kottayam, Kerala India

Abstract
A mutual fund is a professionally managed investment fund that pools money from
many investors to purchase securities. These investors may be retail or institutional in
nature.
Mutual funds have advantages and disadvantages compared to direct investing in
individual securities. The primary advantages of mutual funds are that they provide
economies of scale, a higher level of diversification, they provide liquidity, and they
are managed by professional investors. On the negative side, investors in a mutual
fund must pay various fees and expenses.
Primary structures of mutual funds include open-end funds, unit investment trusts,
and closed-end funds. Exchange-traded funds (ETFs) are open-end funds or unit
investment trusts that trade on an exchange. Mutual funds are also classified by their
principal investments as money market funds, bond or fixed income funds, stock or
equity funds, hybrid funds or other. Funds may also be categorized as index funds,
which are passively managed funds that match the performance of an index, or
actively managed funds. Hedge funds are not mutual funds; hedge funds cannot be
sold to the general public and are subject to different government regulations.

Introduction
Mutual funds are normally classified by their principal investments, as described in
the prospectus and investment objective. The four main categories of funds are money
market funds, bond or fixed income funds, stock or equity funds, and hybrid funds.
Within these categories, funds may be sub classified by investment objective,
investment approach or specific focus.
The types of securities that a particular fund may invest in are set forth in the fund's
prospectus, a legal document which describes the fund's investment objective,
investment approach and permitted investments. The investment objective describes
the type of income that the fund seeks. For example, a capital appreciation fund
generally looks to earn most of its returns from increases in the prices of the securities
it holds, rather than from dividend or interest income. The investment approach
describes the criteria that the fund manager uses to select investments for the fund.
Bond, stock, and hybrid funds may be classified as either index (or passively-
managed) funds or actively managed funds.
OBJECTIVES

1. To find the consumer behavior towards Mutual Funds.

2. To compare the returns or benefits between Mutual Funds and Bank
Investments.

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 Online International Interdisciplinary Research Journal, {Bi-Monthly}, ISSN 2249-9598, Volume-09, Mar 2019 Special Issue (02)

METHEDOLOGY OF THE STUDY

The information for the study has been randomly collected using questionnaire
from only invested respondents and secondary data. This primary data
collection has been analyzed and interpreted using the statistical tools of
figures, tables, etc…

3. Data Analysis
Objective 1: To find the consumer behavior towards Mutual Funds.

Table 1: REASONS FOR PREFERRING MUTUAL FUNDS

Sl. No Parameters Percentage

1 Returns 20%
2 Low risk factor 70%
3 Credit rating 0%
4 Inflation 0%
5 Company 0%
6 Lock in period 10%
Source: Primary data

Table 1 shows the reasons for preferring mutual funds. Most of the
investors are considering low risk factor for their investment. They are not
interested in taking risks.20% of investors are considering returns and 10%
are considering lock in period, which means Mutual Funds Tax saver plans
have three year lock in period and other tax saver plans like insurance, FD,
etc. have five year lock in period.

Objective 2: To compare the returns or benefits between Mutual Funds

and Bank Investments.

Table 2: Comparison between Bank returns and Mutual Fund returns

Investment Tool Investment Period Return

Bank Fixed Deposit 1 year 8 % Maximum
Bank Recurring Deposit 3 year 8.6 % Maximum
Mutual Fund Large cap 3 Year 15 % Maximum
deposit return
Mutual Fund Small cap 1 year 33 % Maximum
deposit return
Source: Secondary Data
The above table shows the huge break between bank deposits and Mutual Funds in
terms of their returns. The maximum return that we are obtained from bank deposits is
8.6 % per annual, but large cap mutual funds provided average 15% principal growth.
The stunning return which attracts huge investors provided by small cap mutual
funds, which offers 33 % return annually. So, if we rationally analyses the
psychology of an investor, we can assume that he will choose mutual fund
investments instead risk factor of mutual funds.

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 Online International Interdisciplinary Research Journal, {Bi-Monthly}, ISSN 2249-9598, Volume-09, Mar 2019 Special Issue (02)

Conclusion
Mutual funds have advantages and disadvantages compared to direct investing in
individual securities. The primary advantages of mutual funds are that they provide
economies of scale, a higher level of diversification, they provide liquidity, and they
are managed by professional investors. On the negative side, investors in a mutual
fund must pay various fees and expenses.
The study reveals the truth that the consumer prefers mutual funds against equity
investments due to the lowered risk factor, and also it provides decent returns when
we comparing with the equity investments in our economy. Mutual funds also
provides tax saver plans with sufficient returns which have lesser lock in period that
attract taxable individuals and institutions in our nation.
In the study, we can see that mutual funds offering two times higher returns than the
bank deposits. So all the above facts clearly tell us the truth that the mutual funds
have great potential in India, but clogged by lack of popularity in our nation. So we
need to give proper awareness for mutual funds which will give an advantageous
effect in our economy.
Suggestions

• Most people didn’t know about Mutual Funds. So making awareness about
Mutual Funds in the society is essential.
• Intervention of Government is essential in the field of Mutual Funds.
• The government should promote Tax Saver investments in India.
• Investors consider return as the important parameter for investing.
• The Government authorities should provide more awareness about Systematic
Investment Plans. It provides better returns from equities.

References

1. Sundar Sankaran(2018) Indian Mutual Funds Handbook 5th Edition: A Guide

for Industry Professionals and Intelligent Investors- Vision Books, New Delhi
2. https://www.amfiindia.com/research-information/other-data/industry-data-
analysis
3. https://scripbox.com/blog/2-reasons-why-bank-fixed-deposits-alone-wont-
make-you-rich
4. Monthly reports of different AMCs like HDFC Mutual Funds, RELIANCE
Mutual Funds, ICICI Mutual Funds, etc.

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